Residuary Estate

A residuary estate is any part of the testator's estate that is not specifically gifted to a beneficiary in the will.

A residuary estate is essentially everything in a person’s estate that isn’t supposed to go to someone in particular.

Let’s back up a tad.

A person’s “estate” is all of a person’s possessions they leave behind when they die. 

In a will, people usually leave certain possessions to certain people, but most people own too much to gift every single possession to specific people. 

And sometimes people forget about certain items when they write a will or acquire items after the will is written. 

So after the specific gifts have been distributed, there are still various things that aren’t left to any particular person. 

These leftovers are called the residuary estate.

The residuary estate also includes things that were left to a person who has since passed away. If the deceased left a boat to Uncle Willie, but Uncle Willie has also passed away, the boat becomes part of the residuary estate.

Finally, when a person writes a will, they often leave money to certain people. However, sometimes there’s money left over. Any monetary assets that are not distributed are also included in the residuary estate.

Who gets the residuary estate?

After the rest of the estate has been probated, the person who inherits the residuary estate is called the residuary beneficiary. There are several ways that a person becomes the residuary beneficiary.

First, when a person writes a will, they can specifically name residuary beneficiaries. In our example, if Susan wanted anything not specifically gifted to someone to go to her cousin, she could name that cousin in her will as the residuary beneficiary.

As you read a person’s will, you can look for the “residuary clause,” which typically looks something like this: “I leave the residue of my estate to my cousin if she survives me. If she does not survive me, I leave it to my niece.” 

A residuary clause makes it very clear who the deceased intended to leave the residuary estate to. 

However, if Susan forgot to name someone as the residuary beneficiary, the probate courts would name a residuary beneficiary after the rest of the estate has been probated. 

It’s also possible that there’s a per stirpes clause, which gives the designated assets to the heirs of the deceased beneficiary. More on that in our Per Stirpes vs. Per Capita piece. 

The probate process is different in each state, but usually, the courts name the next of kin as the residuary beneficiary. 

If you’re still lost on probate in general, we’ve got your back. 

But what if Susan didn’t have a will? In the United States, many people die without a will (the legal word for this is dying intestate). 

When that happens, the estate still needs to be probated, so the courts decide how a person’s assets are distributed according to local law. 

This process is similar to what happens when a person forgets to name a residuary beneficiary. The courts follow a series of intestacy laws, which are specific to each state, to settle the estate’s debts, pay its taxes, and then divide its assets. 

In these cases, the next of kin is typically named as the residuary beneficiary.

When is the residuary estate distributed?

The residuary estate is distributed as one of the last steps in the probate process. Unfortunately, this process takes a long time. On average, it takes around 18 months between filing the right forms, cataloging all of the deceased’s assets, and settling any of the estate’s debts. 

And if there’s a dispute about the will, this process can take even longer.

So if you’re named as the residuary beneficiary in a person’s will, it will probably be a year or more before the courts release the residuary estate to you.

As a basic example, Susan dies with $100,000. She leaves $30,000 to her favorite charity, $10,000 to her daughter in law, $10,000 to her aunt (who has since passed away), and $10,000 to her church. 

She sold her house, but has an apartment with furniture and clothing in it, most of which she didn’t leave to anyone in her will. The remaining $40,000, the $10,000 for the deceased aunt, and any of the ungifted possessions in Susan’s apartment would be the residuary estate.